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The Chicago Federal Home Loan Bank has taken another important step towards opening new conduit programs that will provide an avenue for FHLB member institutions to originate and sell government-backed loans and private jumbo loans.

In related news, the Atlanta FHLB has rejoined the Mortgage Partnership Finance that was pioneered by the Chicago FHLB back in the 1990s.

Under the traditional MPF program, the Chicago regional bank purchased mortgages from member institutions and held the loans on its balance sheet under a risk sharing agreement. More recently, the Chicago FHLB entered into conduit program with Fannie Mae.

Last September, Ginnie Mae and the Chicago FHLB agreed on a plan to set up a conduit program that will funnel Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture backed-loans into Ginnie Mae mortgage-backed securities.

The Federal Housing Finance Agency has finally given the Chicago FHLB approval to start a pilot program for its Ginnie Mae conduit that is officially called the MPF Government MBS program. The pilot program is limited to FHLB member institutions in Illinois and Wisconsin.

"We are still finalizing the documents with Ginnie Mae and we are organizing the pilot program," Chicago FHLB spokeswoman Melissa Warden told NMN Thursday afternoon.

The Chicago FHLB also is working on a limited rollout of a conduit program that will allow its members to originate and sell jumbo mortgages to Redwood Trust, a mortgage REIT based in Mill Valley, Calif.

"At this point, we are working with targeted Chicago participating financial institutions on the on-boarding process" Warden said.

Once the pilot programs are road worthy, the Chicago FHLB intends to give other FHLBs that participate in the Mortgage Partnership Finance program access to the MPF Government MBS program and the jumbo MPF Direct program.

Meanwhile, the Atlanta Federal Home Loan Bank has signed on again with the Mortgage Partnership Finance program to provide its members with a conduit for the sale of conventional home loans to Fannie Mae.

The Atlanta FHLB said Thursday that it has signed up for the MPF Xtra program, which is run by the Chicago FHLB. The Chicago program aggregates loans for sale to Fannie. In the second quarter, the FHLB member institutions originated and sold $466 million single-family loans to Fannie via the MPF Xtra program.

"Our shareholders count on us to deliver innovative products like MPF Xtra that can improve their competitive positioning and help their businesses grow," said Atlanta FHLB executive vice president and chief business officer Robert Dozier.

"With MPF Xtra, our shareholders, regardless of their size, can offer their customers the same competitively priced loans and keep the option to sell or retain the servicing of those loans," he added.

The Atlanta FHLB was a member the traditional MPF program until 2007. The traditional program, which is still available, requires participating FHLBs to keep the loans and the risk on their balance sheets.

"We wanted an option that is off-balance sheet at this point in time," said Atlanta FHLB spokeswoman Sharon Cook. The MPF Xtra program "gives us a solution to meet the mortgage needs for our shareholders without holding the loans."